Understanding TTB Change of Ownership vs Change of Control: A Comprehensive Guide for Wineries, Breweries, and Distilleries

The stakes for getting this wrong are high: failure to properly report ownership or control changes within the required timeframes can result in automatic permit termination, cessation of operations, significant tax consequences, and substantial penalties. This comprehensive guide examines these critical distinctions across all three major types of alcohol beverage operations, providing clarity on requirements, timelines, and consequences.

Fundamental Definitions

Change of Proprietorship (aka “Change of Ownership”)

A change of proprietorship occurs when there is a change in the entity that owns and operates the business. This is synonymous with change of ownership and may be due to a change of entity type (for example, a change from sole proprietor to LLC, from a partnership to a corporation, etc.). The key characteristic is that the entity that previously owned the business no longer operates or owns the operations at that location.

Common Examples:

• ABC Winery LLC sells its entire operation to XYZ Corporation
• A sole proprietorship converts to a limited liability company
• Conversion of an entity (Ex: partnership or LLC restructures as a corporation)
• Complete business acquisition or sale

Change of Control

A change in actual or legal control occurs when there are changes in stock ownership, LLC membership ownership, or major changes in the corporate officers or directors of a corporation. In these situations, the legal business entity that operated the business in the past continues to operate the subject business. The same legal entity remains in existence and continues to operate the business in question.

Common Examples:

• Changes in stock ownership percentages within the same corporation
• Addition of new LLC members
• Significant changes in corporate officers or directors
• Majority ownership transfer within the same legal entity

Requirements for Bonded Wineries

Change of Proprietorship (Change of Ownership) – Wineries

For bonded wineries, a change of proprietorship involves two distinct legal entities where the original business entity no longer exists or no longer owns the winery. The successor bonded winery, bonded wine cellar, or tax-paid wine bottling house must qualify in the same manner as the proprietor of a new bonded winery before commencing or continuing business.

Key Requirements:

• Must file TTB Form 5120.25 (Application to Establish and Operate Wine Premises) as a complete new application
• Requires new bond approval (unless exempt)
• Must complete full re-qualification process
• Cannot commence or continue business until all necessary registrations and permits are approved

Critical Timeline: If a change in proprietorship occurs prior to the filing and approval of the new registration and bond, or if the Basic Permit application is not filed within the required 30-day period, all regulated operations must cease until approval is granted in writing by TTB. Failure to do so will result in automatic termination of the predecessor’s permit and possible adverse action and significant tax consequences.

Change of Control – Wineries

For wineries experiencing a change of control, the same legal entity continues to exist and operate. Federal regulations require an amended Application to Establish and Operate Wine Premises (TTB Form 5120.25) to be submitted within 30 days of the change.

Key Requirements:

• File amended TTB Form 5120.25 within 30 days
• Describe the change of stock or interest ownership
• Report major changes in officers or directors that could result in a change in actual control
• If a new LLC member or stockholder holds more than 10% and is not already on record, file Personnel Questionnaire (TTB Form 5000.9)

The advantage of a change of control is that if the amendment is filed within the required 30-day period, operations can typically continue while the amendment is pending TTB approval.

Requirements for Breweries

Change of Proprietorship (Change of Ownership) – Breweries

For breweries, the requirements for change of proprietorship closely mirror those for wineries, but use brewery-specific forms and procedures. The Internal Revenue Code provides that no individual, firm, partnership, corporation, or association shall commence or continue the business of a brewer until all bonds required have been approved, unless the brewer is exempt from bond requirements.

Key Requirements:

• Must file TTB Form 5130.10 (Brewer’s Notice) as a complete new application
• Successor brewer must qualify in the same manner as the proprietor of a new brewery
• New bond required (unless exempt from bond requirements)
• Personnel Questionnaires (TTB Form 5000.9) required for all new personnel

Critical Timeline: To ensure continuity of operations, all conditions and requirements of Federal laws and regulations must be met. It is imperative that a brewer’s notice, bond (if required), and other qualifying documents be filed well in advance of the proposed effective date of the change. If a change in proprietorship occurs prior to the filing and approval of the new application, all regulated operations must cease until approval is granted in writing by TTB.

Change of Control – Breweries

When breweries experience a change of control, they must file an amended Brewer’s Notice within 30 days. When there is a change in the officers, directors, or stockholders of 10 percent or more, the brewer will submit an amended Brewer’s Notice on TTB Form 5130.10 within 30 days of the change.

Key Requirements:

• File amended TTB Form 5130.10 (Brewer’s Notice) within 30 days
• Show next sequential serial number and describe the change
• If new LLC member or stockholder holds 10% or more and is not already on record, file Personnel Questionnaire (TTB Form 5000.9)
• Existing bond typically continues with possible consent of surety required

Requirements for Distilled Spirits Plants (Distilleries)

Change of Proprietorship (Change of Ownership) – Distilleries

Distilled spirits plants face the most complex requirements and strictest enforcement among the three business types. The Internal Revenue Code provides that no individual, firm, partnership, corporation, or association shall commence or continue the business of a distiller, warehouseman, or processor until all bonds required have been approved.

Key Requirements:

• Must file TTB Form 5110.41 (Registration of Distilled Spirits Plant) as complete new registration
• Successor DSP must qualify in the same manner as proprietor of a new distilled spirits plant
• May require both Operating Permit (under IRC) and Basic Permit (under FAA Act)
• Complete re-qualification process required before commencing business

Enhanced Enforcement: TTB appears to be implementing strict enforcement of 27 CFR § 19.126 and § 19.127, which means terminating the permits of any DSP that fails to report ownership changes within 30 days. If a change in proprietorship occurs prior to the filing and approval of the new registration and bond, or if the permit application is not filed within the required 30-day period, all regulated operations must cease until approval is granted in writing by TTB.

Change of Control – Distilleries

For distilleries experiencing a change of control, Federal regulations require an amended registration (TTB Form 5110.41) to be submitted within 30 days of the change. An Operating Permit issued under the IRC, or a Basic Permit issued under the FAA Act, is not transferable by reason of a change in actual or legal control of the company.

Key Requirements:

• File amended TTB Form 5110.41 within 30 days
• Show next sequential serial number and describe changes
• Personnel Questionnaire (TTB Form 5000.9) required for new 10%+ holders
• Proprietor’s permits will automatically terminate unless new application filed within 30 days

Compliance Reviews: When submitting a Permit Amendment, take caution that TTB may conduct a compliance review before considering the amendment. If there are any missing or late Excise Tax or Operational Reports, the amendment may not be processed until reporting is brought current.

Critical Compliance Requirements Across All Business Types

Universal 30-Day Filing Requirement

Regardless of whether you operate a winery, brewery, or distillery, and regardless of whether the change involves proprietorship or control, all changes must be reported to TTB within 30 days. This timeline is non-negotiable and failure to meet it can result in severe consequences.

Reporting Thresholds

10% Ownership Rule: For changes of control, any change involving 10% or more ownership must be reported to TTB. Personnel Questionnaires are required for new individuals holding 10% or more who are not already on record.

Personal Status Changes: Marriage or divorce can often trigger reporting requirements if they affect ownership percentages or control structure of the business.

Complex Ownership Structures: Businesses with complex ownership structures (holding companies, trusts, etc.) must report flow-through changes in control from parent entities.

Consequences of Non-Compliance

The penalties for failing to properly report ownership or control changes are severe and can include:

• Automatic permit termination
• Immediate cessation of all regulated operations
• Loss of small producer tax credits
• Significant tax consequences and back taxes
• Fines, suspensions, and other penalties
• Adverse action by TTB
• Requirement to re-apply as entirely new business

The following interactive chart provides a detailed comparison of requirements across all three business types:

Tax Implications

CBMA Tax Credits

One area where TTB has increased enforcement relates to Craft Beverage Modernization Act (CBMA) tax credits. If ownership change applications are not filed within the required 30-day period while excise tax reports continue to be filed by the new owner, TTB has no way of verifying that the new entity qualifies for tax credit deductions.

The original entity may have qualified for tax credits, but the new entity may or may not qualify, depending in part on their ownership details. Tax credits can only be applied on up to 750,000 gallons per year total across all winery sites owned by a single business entity.

Small Producer Rates

Small producer rates only apply if you have a valid permit. Failure to timely secure a new permit can result in automatic permit termination and loss of eligibility for these favorable tax rates.

Strategic Considerations and Best Practices

Planning and Timing

Given the strict 30-day timeline and the complexity of TTB applications, it’s crucial to plan ownership or control changes well in advance. Applications should be filed as early as possible to ensure continuity of operations.

Legal Consultation

While a lawyer is not required for this process, the complexity of TTB regulations and the severe consequences of non-compliance make it worthwhile to consult with experienced attorneys familiar with TTB-related legal issues when planning to buy, sell, or restructure any alcohol beverage business.

Documentation and Record-Keeping

Maintain detailed records of all ownership interests, organizational documents, and any changes in business structure. TTB may require extensive documentation to support applications and amendments.

State and Local Compliance

Remember that TTB compliance is just one layer of regulation. Businesses must also ensure compliance with all applicable state and local laws, which may have additional and/or different requirements and timelines for reporting ownership or control changes.

Where to File Applications and Amendments

TTB recommends filing all permit applications and amendments electronically through TTB Permits Online. This online system streamlines the application process and provides faster processing times compared to paper submissions. For technical support with the online system or questions about the filing process, contact information and helpful resources are available through the Permits Online customer support page. If your business doesn’t have a Permits Online Account, or originally filed paper applications, it may be necessary to file the amendment or application via paper.

Recent Enforcement Trends

TTB has significantly increased its enforcement efforts regarding ownership and control change reporting. Previously, TTB provided some leeway and was known to approve ownership change amendments even after the 30-day statutory period. However, with increased budget and enforcement resources, TTB now strictly enforces the regulatory timelines. This enhanced enforcement includes:

• Automatic permit termination for late filings
• Compliance reviews before processing amendments
• Requirement that all excise tax and operational reports be current before amendments are processed
• Increased scrutiny of complex ownership structures

Conclusion

Understanding the distinction between change of ownership/proprietorship and change of control is crucial for any business operating under TTB oversight. While the fundamental concepts are consistent across wineries, breweries, and distilleries, each type of operation has specific forms, procedures, and requirements.

The key takeaways for all TTB-regulated businesses are:

1. Act quickly: You have exactly 30 days from any ownership or control change to file appropriate paperwork;
2. Understand the distinction: Change of proprietorship requires full re-qualification; change of control requires only amendments;
3. Plan ahead: File applications well in advance of proposed effective dates to ensure continuity;
4. Stay compliant: Keep all excise tax and operational reporting current to avoid delays in processing amendments;
5. Seek expert guidance: Consult with qualified legal counsel familiar with TTB regulations for any significant business changes;

The consequences of non-compliance are too severe to risk attempting to navigate these complex requirements without proper understanding and preparation. When in doubt, err on the side of over-reporting rather than under-reporting, and always file within the 30-day window to maintain your permits and keep your business operating legally.

This article is for informational purposes only and does not constitute legal advice. TTB regulations are complex and subject to change. Always consult with qualified legal counsel familiar with current TTB regulations when planning any ownership or control changes for your alcohol beverage business.